Clerical Error of Lyft During Earnings Report

Lyft's CEO David Risher

By Megan Locke

February 21, 2024

“Look, it was a bad error, and that’s on me” is what the CEO of Lyft, David Risher, told CNBC after the company released its fourth-quarter earnings report with a mistake that projected its margin to expand 500 basis points -or 5 percentage points- instead of 50 basis points in 2024. The extra zero that slipped into the earnings release of this ride-hailing company sent shares surging 67% in after-hours trading following the initial press release on Tuesday, February 13th. The figure forecasted its adjusted earnings margin as a percentage of its bookings and the inflated margin triggered algorithmic trading. 

Lyft was quick to take responsibility for the “clerical error” when it became evident there was significant interest in the margin. Within less than an hour of the initial release, CFO Erin Brewer addressed the statement on the earnings call with analysts correcting the expected profitability metric from 500 basis points to 50 basis points for growth in 2024. Risher was also quick to confirm that the initial figure incorrectly included an extra zero. Before the report on Tuesday, Lyft started the year with shares down 19% and a loss of 80% of its share value since the IPO in 2019. Lyft's surge in shares reversed following the correction, representing a market cap decline of over $2 billion. Despite the mistake, overall shares soared 35% to $16.39 on Wednesday, marking the highest close in more than a year. 

The stronger-than-expected quarterly report shows Lyft increased revenue by 4% from $1.175 billion a year earlier, and gross bookings jumped by 17% compared to the year before, ahead of estimates for $3.67 billion. Lyft has invested millions of dollars to compete with rival giant Uber which reported its first full year of profit since going public in 2023 and recently $7 billion in buybacks. Lyft's active riders have grown 10% in the fourth quarter from a year prior and continues to focus on riders with its Women+ Connect initiative and guaranteed airport pick-up. Driver pay transparency is another priority for Lyft, as the company announced drivers will earn at least 70% of the amount riders pay (excluding external fees). Lyft is hopeful for positive free cash flow for 2024. 

Even with thousands of eyes reviewing earnings reports before it is released to the public, typos do happen and Lyft is not the first to make a mistake at this scale. In 1999, the president of a biotech company Biomatrix reversed two digits on an earnings call stating the company delivered 23,000 injectable knee-pain drugs rather than 32,000, which led to a 10% drop in share price. In 2019, the cybersecurity company Crowdstrike forecasted quarterly revenue of $38.6 million instead of $138.6 million, causing shares to drop 6%,-once corrected, the share price recovered by 6%. In 2022, Affirm Holdings was sued by investors for misleading investors that the quarter was better than it was. The judge dismissed the case on no evidence for intentionally misleading the public. Given Lyft’s immediate restatement, it will be difficult to build a case against Lyft for fraud.

Building investors’ confidence will be an important step going forward for stabilizing Lyft’s market share and protecting its reputation, especially as this mistake comes at a time of tension between Lyft drivers and the company.